Thursday, March 16, 2006

Costs

There's a few other posts here for you to ponder, but the real stuff - for this unit -

Consider the following costs for a pizzaria. They go in order of Q in dozens/TC/VC

0/$300/$0
1/$350/$50
2/$390/$90
3/$420/$120
4/$450/$150
5/$490/$190
6/$540/$240

a. What is the fixed cost? how do you know?

b. What is the marginal cost per dozen pizzas using TC? What is the marginal cost per dozen pizzas using VC? What is the relationship between the two?

11 comments:

gorman said...

Woot, first one to post on this.
A. The fixed cost of the product is $300. I know this because Fixed cost is the difference between variable cost and total cost. There is no variable cost therefore the fixed cost is 300. Also i could tell because there is no quanity produced

B. The relationship between variable cost and total cost is the fixed cost+ variable cost=total cost. Im not quite sure if you are supposed to average the marginal costs of all the dozens of pizza... It seems like it is varying from dozen to dozen of pizza. The marginal cost using vc is between 50-30$ and the marginal cost using tc is 50-30$. They are the same marginal cost for each increment

The Amazing O-clam said...

A. Yeah, Gorman wins, the fixed cost never changes, so it will be the same as the TC for producing 0 items...

helen said...

A the fixed cost is $300 because even if 0 pizzas are produced, it still costs $300

The Amazing O-clam said...

Not responding to this post really... But:
Would holidays and their affecting economy be macro or micro? i.e. St. Patrick's Day on Bars?

Annie said...

a) the fixed cost would be 300 because when there is 0 quantity being produced, the variable cost is also 0 however the total cost is still 300, so this could be the cost for the rent or machinery etc.

Annie said...

b) if i understand correctly, margianal cost is the cost of producing the next pizza, and with total cost it is smallest at quantity 2/3 and 3/4 at $30, using variable cost it is the same thing between 2/3 and 3/4 it is $30 to produce the next pizza. I think both variable and total costs are the same in this situation but vary with different situations.

Bethany said...

A. The fixed cost is $300 dollars because you can find it by subtracting the variable cost from the total cost.

B. The marginal cost can be found by either looking at the TC or VC. This is because VC is the only cost that is changing. The MC per dozen pizzas is decreasing, then increasing. It goes
Q MC
1 50
2 40
3 30
4 30
5 40
6 50

amepham said...

The fixed cost would be $300 since it is the TC at zero items being produced.

schmid said...

A. The fixed cost is 300. The fixed cost never changes and it is equivalent to the total cost for producing 0 items.

theczyzewicz said...

a. fixed cost=$300, that is total cost when none are made.

theczyzewicz said...

wow, part a. was a lot easier than part b.

The TC marginal cost goes from 50-40-30-30-40-50
The VC marginal cost is 50-40-30-30-40-50.
They are the same. interesting.